Category: Independent Media

What’s the economic value of a journalist?

Journalists are historically thick about the notion that they are part of a business model; that they are employed not so much for the public good but because somebody has figured out how to make more money from their work than it costs to produce. That thickness is part of what makes them good at what they do; good journalists tend to follow the trail of information regardless of how they fit into someone else’s profit motive. It’s also why the outsider complaint — “The reporter only wrote that story to sell papers” — never gets any traction.

But the business model under which  most journalists have always worked is under attack right now, and that’s changing the very basics of the job: who wants to hire them, what the job requires, and how much it pays.

In recent good times, a newspaper would bring in about $1.35 in revenue for every $1 spent to run the place. That includes such inelastic expenses as distribution and printing. If you eliminate those expenses from the equation (which an economist wouldn’t do, but this is a journalist-centric view, in which the value of a newspaper to its readers and advertisers is directly proportional to the quality of its reportage) then the economic value of a journalist is at least 1.35 times salary and benefits.

But in times like this, newspaper profits are down — which means the economic value of  journalists is down too. The work of the newsroom simply produces less profit so, therefore, the value of each person in that newsroom is less.

Media companies deal with this as any business would: When profits drop, you reduce costs. Most media start with manufacturing: production, printing and distribution. (Tips for reducing production costs; 34 tips for cutting costs; United Media cost-reduction strategy.)

But when profits continue to drop, people start to lose their jobs. And despite what journalists like to think about their value, cutting reporters and editors usually stops the bleeding pretty quickly. That’s because producing news isn’t the same as producing, say, cars or other manufactured goods.

If you cut people from the auto assembly line, you can’t make as many cars. Which means you can’t sell as many cars. In a recession, that’s OK because fewer people want to buy those cars anyway; jobs get cut because there’s an imbalance between supply and demand.

But in media, you can cut an untold number of reporters and editors without actually reducing output (Journalism jobs decrease 34% Jan 08-Jun 09). The quality of the reporting might suffer; graphics might not be as well thought-out; typos and errors may increase. But the audience still gets the same quantity of news, and the advertisers still get the same audience.

When a recession ends, a car manufacturer can’t sell more cars unless it hires back workers to increase production. But a newspaper can see advertising revenues increase at the end of a recession regardless of whether it puts more people back into the newsroom. That’s why financial and spreadsheet types like investing in media; the correlation between employment and profit is indirect enough that they can choose to ignore it.

This can go on for a long time, and it has. Eventually, people start saying things like, “That newspaper is just a shadow of its former self.” And any rational explanation about declining profitability should include the long-term effect of decreasing quality and comprehensiveness.

But that’s simply not the entire reason newspapers, magazines, radio and TV are struggling; I’d argue it’s not even a major factor — just a bad symptom.

The real reason is competition. Years ago, a major metropolitan morning newspaper’s only competition was the afternoon paper. (Remember, the competition isn’t for readers; it’s for advertising revenue). Then came radio, television, cable television, city magazines, alternative weeklies, etc. They may all serve readers differently, but their money comes from the same pot of regional advertisers. More recently, add Google Ad Words,  online magazines such as Slate and Huffington Post, bloggers like Matt Drudge,  social networking like Facebook and Twitter, and dozens of other business models I can’t even think of. The one thing all of these have in common is that they demand a piece of the same marketing budgets that are the financial foundation of newspapers.

Many of these newer organizations pay journalists — but none pay as much for as many journalists as did the old-line media. So not only do newspapers have more competition, journalists have more competition.

All of which is a roundabout way of saying I’m not patient enough to calculate the actual economic value of a journalist. But the following items seem clear:

  1. Economic value and social value are separate issues.
  2. Traditional media still seem to be experiencing declining economic value of their journalists. For example:
    Effect of mass layoffs at newspapers
    New news models
    Bloodletting in the newsroom
    Layoff tracker
  3. Meanwhile, types of businesses that didn’t previously value journalists now seem to be the places where the value of journalists is growing. For example:
    This is what you get when you pay for reporters
    The growth of brand journalism
    Best job in the world
    Attention corporations: Hire a journalist
    Winery hires lifestyle correspondent
  4. Entire business models that do away with the cost of journalists are emerging — and starting to attract big money. For example:
    Examiner.com buys NowPublic for $25 million
    www.heightsobserver.org
    www.printcasting.com
  5. Old business models are trying to revive the value of journalists by finding other revenue streams to pay for them. For example:
    How newspapers that charge for content are faring
    Murdoch charges for content
    Electronic newspaper update
    Non-profit newspapers
    AP battles with news aggregators
  6. Old-line business models that see the industry’s decline as merely a function of journalism’s decline somehow seem angry and not very realistic.
    Our Hometown News, Strongsville, OH
  7. The decline in value is related to the recession; when recovery starts in earnest, the decline will flatten out.
    Cox Enterprises hopes for positive earnings
  8. But the decline in value wasn’t caused by the recession; it was caused by huge disruption of traditional business models that involve journalists. For example:
  9. Journalists may be unwilling participants in the dizzying changes taking place. But those who are determined to make themselves valuable will succeed — whether or not it’s through a traditional channel.
    What journalism students need today
    Listen up, old-school journalists
    The future of news is scarcity
  10. I’m pretty sure the economic value of journalists isn’t declining; it’s declined among media that follow traditional business models, but that’s being offset by new models and innovations that are only now starting to emerge.

What would YOU do with 9.5 man-years every day?

facebook-logoIn a discussion/promotion for his business at LinkedIn, Mike Nobels writes that Facebook users spend a total of 5 billion minutes there every day.

That’s 9.5 people-years per day spent on Facebook. I don’t know the source of his information and I haven’t bothered to look at how many people use it; I don’t know the average time spent per user. I don’t even know why this is meaningful.

But it amazes me nonetheless.

BPA Worldwide freezes rates, remains arrogant and irrelevant

BPA Worldwide, a leader in providing third-party circulation audits, has announced that it’s freezing membership dues and audit rates at their July 2008 levels — good through June 2010.

If you’re in the business, you know that BPA is especially strong among magazines with controlled circulation. If you’re not in the business, you need to know that third-party circulation audits are how publications validate their readership claims to advertisers.

BPA is facing obsolescence at an astonishing rate. If BPA is a dinosaur, then the killer meteor has already hit the Earth and the toxic cloud of extinction is on its way. Holding rates will make as much difference to the organization’s future as putting on a sweater.

Am I being a little harsh here? Perhaps. But set aside the fact that for the previous 20 years of my career BPA was one of the most sluggish, obstinate, arrogant and regressive entities I had to deal with. Set aside the fact that — even though it was owned by its customers — it always, without exception, acted as though its role was to prevent me from innovating in my job. Set aside that I don’t know anyone in publishing (though I’m sure there are a few) who doesn’t take some quiet pleasure at seeing BPA suffer.

What BPA faces aside from all that is the fact that its member magazines must find ways to radically reduce distribution costs. That’s required to offset declines in two key performance indicators: advertising pages sold, and cost-per-thousand (CPM) paid for an average page of advertising.

In other words, advertisers are reaching readers less often, and every reader they reach is worth less to them today than it used to be. The only thing advertisers care about is how many people take a measurable action as a result of seeing an ad.

And what is BPA’s ultimate value to publishers? Proof of readers reached. There is nothing that it does, or wants to do, to measure the responsiveness of those readers.

In my last year running business-to-business magazines, I withdrew two of them from membership in BPA. Not because I was so frustrated with the deplorable service BPA provided; but because my advertisers no longer cared about BPA audits. They told me they wanted to know how my audience would respond to their advertising; if I could provide better response per thousand readers than my competitors, nobody cared to see the expensive and painstakingly designed BPA audit statement. (To be fair, advertisers had been telling me that with increasing urgency for about eight years; it just reached a watershed last year — probably brought on by the recession.)

Since that time, I’ve heard of about two-dozen magazines that have terminated their BPA membership — something that used to be as acceptable in media circles as, say, passing gas in an elevator. Entire divisions of media companies have simply walked away from BPA because the organization’s work has ceased to be of value.

I suppose that freezing rates is a reasonable first response. But I don’t give BPA enough credit to understand how inadequate that step will prove to be as its irrelevance grows like a toxic cloud.

A new perspective on the media meltdown

I’ve spent a lot of time describing why advertising and traditional media are on a downward curve. To be sure, the curve has been exaggerated this year by the recession. But it was exaggerated by the last recession too and there’s no doubt that traditional sponsor-based media models are like the classic rollercoaster: in between the highs and lows, the ongoing trend is down.

seth-godin-blogIn a recent blog post, marketing guru Seth Godin puts his own take on the trend. The issue in his mind is that there is a sudden attention surplus — too many people spending so much time looking for all kinds of information that marketers don’t know what to do about it. He calls these micromarkets and says the old media models couldn’t serve them; social media marketing does — though he doesn’t use that terminology

Godin and I come at this from different ends of the business, and in the end reach the same conclusions.

I’m coming at it from the perspective of the media business, where decisions are based on the requirements of the paying customer — the advertiser.

I’m not claiming the audience is ignored; I don’t believe that for a second. But the changes that we’re seeing in old-line businesses — magazines rushing to digital-only editions, newspapers trying to figure out how to charge for online content, etc. — are not at all driven by the opinions of audience. They’re driven by the spending desires of advertisers.

Godin’s perspective is consumer based: He’s observing what the audience wants — and notes the challenge for marketers who are on their way toward getting it.

His explanation strikes me as novel, true, and worth sharing: http://sethgodin.typepad.com/seths_blog/2009/08/the-massive-attention-surplus.html.

Facebook’s future: It’s in your shorts

Just yesterday, a friend (that’s a lower-case, analog friend) told me how much he hates Facebook. He can’t believe how much time people spend there, he wishes he had never registered for it, and he resents the amount of attention it tries to demand from him.

With that said, he asked if I thought it would eventually fade away.

Social media is here to stay, I responded. While Facebook and Twitter may not always be the dominant portals, the notion of social networking that they represent will continue to evolve and embed itself into our communication – just as web browsing and e-mail have done.

Then this article, on Facebook’s acquisition of Friendfeed, crossed my desktop and my opinion evolved.

The most insidious aspect of Facebook is how it brings in new members. First, as I explained to my flesh-and-blood friend, every time someone sets up a new Facebook page, they get the opportunity to scour their own address book for potential Friends (digital, capital-F friends). And because Friends are the currency of Facebook — the more you have, the “wealthier” you are — most people accept this initial chance to let the social networking site into their personal data.

So Facebook searches your computer address book for people who are already registered with the site. I don’t know if it just looks for e-mail addresses or follows a more complex algorithm, but within seconds, it will identify every Facebook member you know and offer — with a single click — to ask them to Friend you. (It’s notable that Facebook has already created a legitimate verb in the word “friend”.)

Then Facebook makes a more extraordinary offer: It identifies everyone in your personal address book who isn’t registered at the site and offers — again, with one click — to let them know how much you’d like them to join Facebook with the purpose of becoming your online Friend.

Insidious and ingenious. For the new user, this is simply a shortcut to Facebook-style wealth — lots of Friends. For Facebook, this is the shortest route to ubiquity — which it could be argued has already been achieved.

So now, Facebook has acquired Friendfeed, which “enables you to discover and discuss the interesting stuff your friends find on the web.” This isn’t unique; Digg.com is better known and does essentially the same thing.

But here’s the key: Friendfeed lets you “Read and share however you want — from your email, your phone or even from Facebook. Publish your FriendFeed to your website or blog, or to services you already use, like Twitter.”

This isn’t unique to Friendfeed either. I’ve seen lists of social media sites that have 350 to 400+ sites listed, with new ones being entered daily. Try Googling “list of social media sites”. Most of them make it easy to publish on your blog, Facebook, Twitter and other leading sites.

What’s the point? Facebook is paying $50 million to buy a social media site that, as its primary function, collects more people — not just from the Web, but also from their phones.

This won’t surprise anyone who thinks strategically about social networking. But for anyone who wonders whether Facebook is going to fade away: It’s less likely every day.

A new tipping point in favor of paid content

PaidContent.com reports that the annual media study by media investment banker VSS (Veronis Suhler Stevenson) showed a tipping occurred in 2008: It was the first time people spent more time with media they paid for — such as books and cable TV — than they did with media that is primarily ad-supported. That report raises a few points:

1. Cable TV is not predominantly ad supported? I must be watching the wrong cable stations.

2. It should come as good news to all the ad-supported media that are feverishly looking for ways to monetize their audience. It means people are willing to pay for content if there is enough value in it, and if they are trained over a long-enough period of time that the stuff just won’t come free.

3. By the time that happens, nobody knows how many traditional media will fail — their markets taken over by an upstart that “gets it.” My short answer: plenty.

4. Even those that are succeeding and profiting from paid content will have some struggles. Competition for the audience dollar is only starting to heat up, and over the next few years will become intense and insane. If you, as a consumer, are paying the full cost of content for books, movies, music, etc. and all of sudden you start hearing from newspapers and magazines that you need to pay more for their content too, and what point do you start making hard decisions about which content you really want and need? It’s not safe to assume that everything you’re paying full-ride for right now is necessarily going to be the winner in that evaluation.

The latest ain’t the greatest in new publishing models

Printcasting.com has launched the latest in an all-out salvo to find a business model that works for media in the digital age.

It’s community-based publishing. Here’s how Printcasting describes it:

If, like us, you’ve always wanted your own publications but you didn’t have the time, technical expertise or talent — no problem! We’ve made it as easy and fast to start a magazine as it is to start a blog…  We do this by separating apart the three primary roles  that exist in any magazine or newspaper: the publisher, the content and the advertising. Instead of one person or organization needing to be responsible for all of that, anyone can participate in any one role.

More specifically, if you’re a writer, you can have your blog’s RSS feed picked up by Printcasting as available content. If you’re a publisher, you can choose any subject  you like, pull content from people who have written about it, punch it into a template and you’re done.

You don’t have to sell any ads, according to Printcasting, because, “We’ve built an extremely simple self-serve advertising tool that makes it as easy for a small business to advertise its wares as it is to write an e-mail. Because Printcasts are niche, the ads are extremely affordable, starting at only $10 per ad.”

Printcasting is supported by a grant of more than $800,000 from The Knight Foundation, which puts a lot of money into media projects of all kinds, and which is especially interested in development of new media models. But that doesn’t mean it’s an idea that’s going to fly.

I’ve said to a lot of people, since the day I first tried to sell content online (1996), that if the Internet is going to prove one thing over time, it’s that people need editors. At the most basic level, that’s what Printcasting is all about. It’s about giving would-be editors the opportunity to practice their craft: identifying content around a theme, pick the best of it and packaging it for like-minded souls.

Here’s what’s wrong with it:

  1. The content is just repackaged from stuff that’s already available if anyone is actually looking for it.
  2. Being able to amass enough credible content to empower the would-be publisher of super-niche topics will be an obstacle.
  3. Printcasting’s view of what publishing is all about is simply wrong. Stating that there are 3 roles to a magazine — content, publisher and advertising — is like saying the principal components of water are ice and a heat source. In Printcasting’s world, audience doesn’t matter; publishing becomes a vanity that is all about picking up someone else’s words, plunking it into someone else’s template, running a few ads (maybe) that someone else sold, and getting to put your name on top of the masthead. The website says it benefits publisher, writer and advertiser alike. But that’s only if a large number of players in all three groups play their roles exceptionally well.
  4. And speaking of advertising, the message I’m getting here is that the problem with advertising is that it’s been too expensive and too hard to buy. So if you can knock down the price to almost nothing and make it self-service, businesses that have never advertised before will suddenly start. Nobody who has actually inhabited the world of advertisers — large or small — could actually believe this.
    Especially if the products they have to choose from are a bunch of magazines that haven’t been through the painful and fundamental process of creating an audience and demonstrating its desire for a publication.
  5. And finally, the ad rate is fixed, no matter how many or how few copies of a publication get printed. That’s a contradiction that can’t be overcome: Publishers need to develop an audience to prove the publication is wanted and read; but they have every incentive to print as few copies as possible, because they can’t recover printing expenses with an increased  rate base.

There is some nuance here. Printcasting could add value — as The New York Times describes it — at the hyperlocal level where a more traditional publication could never offset its costs. The local softball league, for instance, could have its own publication.

But is this new? Or is this just a slicker package around the same  newsletter that the softball league already publishes — with sponsor ads from local bars and the guy who won the trophy concession.

Maybe Printcasting.com will prove viable over time. But if it does, it won’t be as a serious media model or as a meangingful marketing outlet for advertisers. At best, it will be a success in the spirit of those websites that let you design your own greeting cards. It may serve a certain purpose for a certain number of people, and it is one more interesting idea of the Internet Bubble 2.0.

New study says consumers like ads. And it won’t change a thing.

Adweek Magazine and its parent company, Nielsen, have released a study that shows consumers believe in advertising, they accept adveflo-progressivertising as a way of subsidizing other content and, in some cases, they actually like it.

They’ll use this to try to change the rush of money out of traditional advertising, and they won’t succeed.

In an article announcing results of the study, Adweek states that: “67 percent of respondents agree …. (including 14 percent agreeing “strongly”) that ‘Advertising funds low-cost and free content on the Internet, TV, newspapers and other media.’ Likewise, 81 percent agreed (22 percent strongly) that ‘Advertising and sponsorship are important to fund sporting events, art exhibitions and cultural events.’ ”

The only thing startling about this is that such a large percentage of people seem to understand the media business model.logo_adweek2

Adweek also wrote: “Respondents also acknowledged that advertising is useful to them personally as they navigate the marketplace. For example, 67 percent agreed (14 percent strongly) that ‘By providing me with information, advertising allows me to make better consumer choices.’ Respondents even confessed to enjoying advertising, at least some of the time, with 66 percent agreeing (13 percent strongly) that ‘Advertising often gets my attention and is entertaining.'”

This means two things:

1) Adweek is doing its job; it is, after all, a magazine for the people who produce ads, plan campaigns and buy space for them.  This study will be a tool used by readers to convince advertisers to shift money back from the new and social to more traditional ad campaigns.

That’s especially evidenced by this finding in the article: “And there was a lackluster rating for ‘ads served in search-engine results,’ with 4 percent trusting these completely and 37 percent somewhat. Ratings for old media were closely bunched, with TV getting a typical rating for these of 8 percent “trust completely” and 53 percent “trust somewhat.”

In other words, Google’s astoundingly ascendant paid search model — traditional media’s Great Satan — isn’t as effective as many believe. At least, that’s the kernal that media reps are likely to grab onto and use.

Which raises the second meaning of the information:

2) There are lots of highly respected voices in media and advertising who still don’t get it. The epochal media meltdown we’re experiencing has nothing to do with the opinions of consumers.

Advertisers aren’t pulling campaigns because they don’t work; they’re pulling campaigns because they can now do what they’ve always wanted to do: reach consumers directly without an intermediary media.

Back in another era — the Internet bubble of the late 1990s — this was called disintermediation.

Disintermediation is why people book flights directly with airlines rather than through travel agents; it’s why Progressive and Geico have a higher profile than the independent insurance agents who used to do most of the selling in their industry; it’s why people will visit a magazine advertiser’s website instead of filling out a reader-response card in the back of a magazine.

Disintermediation is a simple process of applying new technology to eliminate an old and costly middleman. Heck, media is the root of the word; is it really a surprise that media is now a target?

So it doesn’t matter if old advertising works; it ads a layer that is no longer necessary. Just as there are still travel agents and insurance agents, there will still be media — as we recognize it today — far into the future. But it will be smaller than it used to be, and it will find its success by serving niches.

You can download the full Nielsen study here: http://blog.nielsen.com/nielsenwire/wp-content/uploads/2009/07/trustinadvertising0709.pdf